Question

Concord Company produces golf discs which it normally sells to retailers for $7 each. The cost of manufacturing 18,300 golf discs is:

Materials		$  9,333
Labor		26,718
Variable overhead		19,032
Fixed overhead		37,149
Total		$92,232

Concord also incurs 4% sales commission ($0.28) on each disc sold.

McGee Corporation offers Concord $4.77 per disc for 5,630 discs. McGee would sell the discs under its own brand name in foreign markets not yet served by Concord. If Concord accepts the offer, its fixed overhead will increase from $37,149 to $42,059 due to the purchase of a new imprinting machine. No sales commission will result from the special order.

(a)

Prepare an incremental analysis for the special order. (Round answers to 0 decimal places, e.g. 1250. If amount decreases net income then enter the amount using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

		Reject Order		Accept Order		Net Income Increase (Decrease)
Revenues		$		$		$
Materials
Labor
Variable overhead
Fixed overhead
Sales commissions
Net income		$		$		$

(b)

Should Concord accept the special order?

Answer 1

	Reject	Accept
Revenues	-	(4.77*5630) = 26,855	26855
Materials	-	(2,871)	(2871)
Labor	-	(8219)	(8219)
Voh	-	(5855)	(5855)
FOH	-	(4910)	(4910)
Sales commission	-	-
Net income	-	5000	5000

Accept